Capitalising the neo banking opportunity in the Asia Pacific

Asia Pacific鈥檚 top 10 countries to adopt neo banking


Traditionally banking and financial services industry is a late mover in embracing change, however, over the past five years, it is continuously transforming itself. Now, the industry has given rise to platform-based structures that operate completely online known as neobanks. These banks gained extreme popularity in the United Kingdom and Europe with Revolut, Monzo, and Starling becoming one of the largest in the country (challenger banks) within the region.

Interestingly, neobanks鈥 new hotspot is the Asia Pacific countries. From zero in 2013, Asia Pacific countries today house more than 65 of them.

4 key factors for the rise of neobanks
  1. Next-generation banking needs: Banks鈥 traditional approach of 鈥渙ne size fits all鈥 toward customers, however, fails in today鈥檚 world of personalisation.
  2. Technology-driven interfaces: Platforms, today, are built with state-of-art technologies including, voice chat assistants, artificial intelligence, visual personas, analytical dashboards.
  3. Mindset evolution: Customers鈥 choice to own and manage their digital identities with control over sharing the personal data based on the value.
  4. Bank marketplace (super-apps): The need to build a banking marketplace through a combination of products and services from different providers in a single platform.

Types of neobanks

Neobanks offer banking services completely online with their banking license or in partnership with incumbent banks. They are classified into three broad categories:

  • Standalone digital-only neobanks
  • Digital platforms
  • Digital spin-offs
1. Standalone digital-only neobanks

A bank with a fully operational banking license obtained by the respective regulatory authority in the country of operation. Example, WeBank, China.

2. Digital platforms

A digital platform is a neobank without the ownership of a banking license, offering a suite of products or a unique solution through the operating banking license of other financial institutions and banks. Example, ZA bank Hong Kong.

3. Digital spin-offs

A digital spin-off is an independent digital-only bank created by incumbent banks. Example, Digibank DBS Singapore.

Building blocks of neobanks

Every neobanks is structured based on 5 main elements:

1. Customer centricity:

Building a unique personified experience for each customer to achieve customer engagement.

2. Customer reach:

Targeting a specific niche of customers to cater to an underserved, unserved, and/or unbanked segment.

3. Product stack:

Creating banking solutions to meet customer needs and expectations.

4. Partner ecosystems:

Collaborating to support internal and external infrastructural, strategical needs.

5. Open banking:

Developing a mechanism of internal, external, and public data use to create products, enhance productivity, build synergies, and introduce revenue streams.

Evaluation criteria and methodology for the top 10 countries

To identify the countries fostering the growth of neo banking catering the evolving needs of the individuals and businesses, we studied 13 countries in the Asia Pacific region. We used the weighted ranking method, where each criterion was assigned a weightage and each country was evaluated on a scale of 1 to 10 against the criteria. In this system, a ranking of 1 signifies the lowest score and 10 as the highest score for each criterion.

Table 1: Evaluation criteria for evaluating the top 10 countries

Evaluation criteria Definition
Regulatory initiative The regulatory initiatives undertaken to formulate a legal framework for governing neobanks.
Open Banking Open Banking enables banks to share customer data securely with third-party providers in banks and various sectors through the use of application programming interfaces (APIs) to create innovative data-driven financial products and services.
Rise in number of neobanks The percentage increase in the number of banks (until 2020)
Technology adoption and infrastructure** The demand for digital products/services, infrastructure available to enable digital activities, and connect consumers (IoT, Cloud)
Digital readiness** A country鈥檚 progress towards adopting digital channels
**Source: Cisco Global Digital Readiness Index 2019

Asia Pacific鈥檚 top 10 countries to adopt neo banking

Table 2: A learning list of countries actively adopting neo banking practices

Rank Country Number of neobanks
1Australia 10
3South Korea2
4Hong Kong8
6The Philippines8

Asia Pacific鈥檚 neobank maturity index 2021

Table 2: A learning list of countries actively adopting neo banking practices


The countries classified as leaders have a strong legal framework governing the banks and a high percentage increase in the total number of banks.

Australia, Singapore, and Hong Kong emerged as leaders, displaying maturity in implementing policies that encourage the use of digital-only banking services and the growth of neobanks. Moreover, all three leader countries flaunt a high technology adoption and infrastructure rate, and overall digital readiness.


Australia has seen a huge rise in the number of neobanks relative to the total population. The cut-throat competition may lead to shut down or the consolidation of some of these neobanks. The main parameters driving neobanks in Australia are:

  • High mobile penetration rate
  • Low cost of setting up neobanks
  • Demand for a wide range of personalised services

To understand Australia鈥檚 neo banking ecosystem, click here.


Singapore boasts a large, banked population accounting to approximately 98% of the total population. This coupled with a significant demographic shift towards an aged population poses a threat to the sustainability of neobanks.

However, the newly established regulatory framework foster competition in Singapore鈥檚 banking sector. Moreover, partnerships between fintech companies and non-bank players will succeed in out-investing the traditional banks by offering hyper-personalised services and an enriched banking experience.

To understand Singapore鈥檚 neo banking ecosystem, click here.

Hong Kong

To ensure an even level playing field between traditional and digital-only banks, The Hong Kong Monetary Authority (HKMA) has established the same regulatory rules for both traditional and digital-only banks. The HKMA granted 8 out of 29 applicants a virtual banking license that it received.

Despite having a stringent regulatory framework, Hong Kong鈥檚 neo banking ecosystem is robust and secure. The advent of neobanks has drastically reduced the time taken for opening banks accounts and performing other banking services.

To know more about Hong Kong鈥檚 neo banking ecosystem, click here.


The countries classified as sceptics have a high percentage increase in the number of neobanks, however, they lack a strong neo banking legal framework.

India is the only country identified as a Sceptic. Along with not formulating a formal legal framework, a poor understanding of the digital tools available has decelerated India鈥檚 progress towards adopting digital channels.


India has the largest number of established and upcoming neobanks; however, it hasn鈥檛 formulated a legal policy to allow the creation of digital-only neobanks. India鈥檚 regulatory authorities are still not ready to allow non-banking players to have full control over banking operations by only allowing these new-age banks to operate on the license of incumbents. However, this has resulted in an over-crowded market, housing more than 24 neobanks.

India has experienced a tremendous surge in the number of neobanks over the past five years, indicating a lucrative market for technology-based platforms exemplifying a rich user experience.

As the future outlook, we may witness a consolidation of small neobanks targeting individual customer segments to combat stiff competition. Neobanks are likely to become the frontend service providers while traditional banks form the secondary interface.

To understand India鈥檚 neo banking ecosystem, click here.


The countries with a defined legal framework already implemented or in the process of implementation but observe a low percentage increase in the number of neobanks are classified as pragmatics.

There are broadly four reasons for the low number of neobanks in the country:

  1. Stringent regulations to grant a license
  2. Preference and loyalty towards traditional banks
  3. Unimaginable market share acquisition of the first neobank in a country
  4. Low digital maturity

The pragmatic countries include China, South Korea, and The Philippines.

China has transformed itself into a technological powerhouse by investing heavily in technology and ICT. Technology and artificial intelligence adoption have increased rapidly over the past two decades in China.

South Korea鈥檚 positive attitude towards the latest technology and digitalisation of banks has resulted in South Korea becoming one of the countries with high digital readiness.

Underinvestment in building strong technological infrastructure remains a weak link for The Philippines鈥 competitiveness in the digital space. As a result, The Philippines has a low digital maturity.


In a bid to minimise risk, attract global players in the market to foster competition to the state-dominated banks and enhance financial inclusion, the Chinese Government is formulating their first set of rules to govern the digital-only banking ecosystem. While the Government is formulating the new rules for digital-only banking, it has already granted 4 licenses to consortia-led technology companies to form neobanks in China. These licenses are based on the existing banking act of China.

The appetite for new and innovative banking solutions by a large tech-savvy population is one of the key drivers of neobanks in China. In recent years, technology and telecom giants have grown prominence in the banking industry. China鈥檚 move to formalise neo banking will allow non-bank players to enter the market. Moreover, partnerships by non-banking players with major local banks will enable the banks to capture a major chunk of the market.

The market dominance of the four neobanks since 2015 (Webank and MYbank being global unicorns) with no formal regulatory framework to govern neobanks and new entrants for healthy competition is slowly shifting China toward a laggard approach than a market leader.

To understand China鈥檚 neo banking ecosystem, click here.

South Korea

Only three banks (Kakao Bank, K Bank, and Toss) have a neo banking license by the Financial Services Commission (FSC). These three banks cater to 1/4th of the country鈥檚 population. South Korea鈥檚 regulatory authority observe a conservative approach towards neo banking, restricting the competition to avoid failures.

To understand South Korea鈥檚 neo banking ecosystem, click here.

The Philippines

Due to the widespread popularity of face-to-face banking, The Philippines will not witness a 100% digitalisation in the next few years. This gives traditional banks a distinct advantage over purely digital-only banks. Traditional banks can offer offline services while strengthening their digital propositions.

To understand The Philippines鈥檚 neo banking ecosystem, click here.


The countries neither have a defined regulatory framework nor a growing number of neobanks are classified as laggards.

Indonesia, Thailand and Vietnam are identified as laggards.

Indonesia, Thailand and Vietnam have a low technological adoption rate and overall digital maturity. Three main reasons attributing to the low digital maturity rate are:

  1. Massive demographic shift inching towards the ageing population
  2. Low technological investment

The Otoritas Jasa Keuangan (OJK), the financial services authority of Indonesia established a legal framework that governs the digital banking services provided by banks and non-banks. According to the regulation, digital banking services can either be provided directly by the banks or based on partnerships between the banks and financial services/non-financial services institutions. Despite having 3 digital spin-off neobanks, Indonesia is not categorised as a sceptic due to the low percentage increase in the number of neobanks, where there is a huge opportunity to cater to a majority of unbanked and underbanked population.

The main drivers of neobanks in Indonesia are:

  • High mobile and internet penetration rate
  • Large tech-savvy unbanked population

In the future, there will be an increase in the partnership between fintechs and neobanks following a targeted approach to cater to individual segments namely- SME, rural, and millennial.

To understand Indonesia鈥檚 neo banking ecosystem, click here.


The banks in Thailand follow a rather traditional and conservative view towards digitalisation. The Bank of Thailand announces its decision to study the types of licenses that could be granted to neobanks. This move will help banks in serving the unbanked population.

To understand Thailand鈥檚 neo banking ecosystem, click here.


The State bank of Vietnam is still at the backdrop of forming digital banking policies. However, the country has seen a rise in the number of intermediary e-banking services provided such as e-wallet services and online payment gateways following non-cash regulations.

Partnerships between banks and non-bank players including telecom and technology giants will accelerate innovation in the banking sector and grab a larger market share.

To understand Vietnam鈥檚 neo banking ecosystem, click here.


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